Van Wagenen: Slowly but surely, home inventory being absorbed

While the market still has challenges ahead in 2008, company President Charlie Hamilton said he believes the worst is over.

"We've gone from a frenzy pace, back to a normal one," he said.

Hamilton, who delivered his analysis to home builders and mortgage lenders at LakeRidge Country Club Tuesday, said the 879 homes permitted in 2007 are right on target when compared to the city's historical average of 800 to 900 starts a year.

"This 10-year (construction) period we had was above the normal average as far back as we can track," he said.

Hamilton said he expects builders to permit somewhere from 850 to 900 new homes in 2008,

He also expects the market will continue to absorb new existing inventory that remains vacant.

While 2007 was tough to swallow given the fact that permit activity was off 21 percent, Hamilton said a number of those unsold homes were built by the likes of D.R. Horton and Choice Homes Inc., which have since left the market.

Still others were constructed by weaker builders who have been washed out.

For example, completed-but-unsold inventory in all price ranges fell 19 percent from 168 to 136 as of Dec. 31. The bad news is 70 of those homes have been sitting on the ground since 2006.

That could well explain why builders aren't eager to go on a tear anytime soon.

Hamilton estimates Lubbock has a 4.8-month supply of new homes, compared to a national average of 9.6 months.

"Lubbock has defied that trend," he said.

Hamilton credited both builders and lenders for putting the brakes on until the bulk of empty new homes have been moved off the market.

Hamilton and I both agree on two points easily documented. Lubbock remains one of the most affordable cities in the U.S., and Lubbock's wages have not kept up with the times, making home ownership difficult for some.

The average home price here is $125,800, compared to a statewide average of $191,800 and U.S. average of $224,900.

But the city's median income is a paltry $37,600 - one of the worst showings in the state next to El Paso at $32,100."One of our biggest challenges is attracting higher-paying jobs," Hamilton said, alluding to what can grow home ownership.

While some were shocked by the city's building decline (none of which had anything to do with the nation's subprime mortgage mess), what was more surprising was construction activity in the county.

Lubbock Land Co. reported there were just 131 permits issued in 2007, compared to 252 the previous year - down a whopping 48 percent.

"I polled our audience and they more or less agreed there are now less homes on the market, which is managing itself," he said.